How a Public Bank Could Relieve Seattle’s Housing Crisis

Seattle housing activists pack City Hall in 2017. (source: seattlepi.com)

Like hundreds of cities in America, Seattle is in the midst of an affordable housing crisis. During a one-year period in 2015–16, Seattle rents increased by 9.7 percent — four times the national average. In 2017, the cost of an average two-bedroom topped $2,000. The results have been predictable: nearly half of Seattle renters are currently “housing-cost burdened,” meaning they spend more than 30% of their income on rent.

They may be the lucky ones. A recent Zillow study cited the connection between even modest rent increases and resulting homelessness; meanwhile, King County’s 2017 One Night Count tallied 11,643 homeless people. The Seattle region’s unhoused population now trails only that of Los Angeles County and New York City — and the survey’s flawed methodology means the true count is almost certainly higher.

The solutions offered by Seattle’s political leadership are not sufficient. Despite the mayor declaring a “state of emergency” in 2015, the number of unhoused Seattleites has increased. Washington has no state income tax, so Seattle relies on a complex patchwork of regressive taxes and levies to fund homelessness services and housing relief, fueling middle-class resentment over a perceived “lack of results” and an increasing reliance on means testing to evaluate “what works and what doesn’t.”

As for affordable housing, the most comprehensive solution officials can tout is a “Grand Bargain” that Seattle’s Housing Affordability and Livability (HALA) program claims will create 6,000 affordable housing units over the next ten years. (Seattle’s population has risen by an average of 15,000 every year since 2010, growing by nearly 21,000 in 2015–16 alone.) Billed as the result of a tough negotiation between the city and developers, in reality it’s little more than a giveaway, as the overwhelming majority of apartments constructed as a result of the “Grand Bargain” will be sold and rented at market rates. (The affordability mandate is currently as low as 2% in some parts of the city.)

The wonky proxy battles Seattle is currently engaged in — disputes over upzoning this or that block, whether or not we should allow tiny homes in this or that neighborhood, and similar stuff of urbanist wet dreams — all serve to conceal a far simpler truth, which our politicians long ago ceased debating: it is not sufficiently profitable for private developers to build affordable housing, nor is it profitable for private banks to invest in affordable housing on cities’ behalf. They would much rather build higher-margin luxury units, which they have no problem finding banks to invest in, affluent tenants to occupy, or foreign investors to purchase.

Housing, we often hear from politicians in Seattle, is a human right. But unlike, say, the right to clean air or water — rights which are actually enshrined and protected in our laws — the right to a home is not guaranteed.

None of this is inevitable. It is not the result of some grand design; it is a quirk of American capitalism, replicated to such an inhumane degree in few other places in the developed world.

How can we begin to tackle this problem? We cannot look to the federal government, which has steadily eroded what little public housing exists in America over the last forty years, and slashed annual funding by $6 billion earlier this year. Taxes alone cannot substantively address the issue, either; certainly not as long as our politicians lack the conviction to impose them on those who benefit disproportionately from the status quo.

It’s important to keep in mind that all this is occurring in a city in the midst of an unprecedented period of economic growth. Suppose the country enters a long-overdue recession, or worse, a 2008-style financial crisis? It’s likely that what few scraps are currently being doled out will begin to dry up, and Seattle’s most precarious residents will be told to tighten their belts even further — or leave.

In order to meaningfully address the housing crisis in Seattle, it must be done at the local level; it must come not merely in the form of taxes that can be lifted or expire. Nor must it come from developer partnerships that prioritize luxury housing profits in exchange for tossing in a modicum of affordable units. Most importantly, the right to housing must not wax and wane with the stock ticker. We must build institutions capable of holistically and comprehensively addressing our housing needs until there are no more impoverished citizens sleeping on Seattle’s streets, or devoting half their paychecks to the roofs over their heads — and we can start doing this right now.


In February 2017, the Seattle City Council made national news by voting unanimously to allow its contract with Wells Fargo to expire. It was a well-fought victory for indigenous and environmental activist groups, who cited the bank’s funding of the Dakota Access Pipeline and private prisons among reasons for their opposition. At the end of 2018, the contract will expire, and Seattle will take its $3 billion elsewhere. However, options for a more conscientious banking alternative are limited. The city is not permitted by law to conduct its business with credit unions, and so the prospect of Wells Fargo being replaced by another private bank with Wall Street ties is likely. This is unacceptable to activist groups such as Mazaska Talks, and so they have been advocating for a novel alternative: creating a Seattle public bank.

A public bank is a financial institution operated by and accountable to a state or city government. Unlike private banks, which are beholden only to shareholders, a public bank’s mandate is to serve the public good. Public banks are funded primarily by taxes and fees. A government can deposit funds directly into its public bank, and in turn issue loans directly to fund or invest in any enterprise deemed essential to the public good, fostering responsible and transparent economic growth.

While most cities and states pay hefty sums of money and outrageous interest fees to have private banks fund their infrastructure projects, a public bank can do this at a significantly lower cost. It can also do so without exposing itself to the boom-and-bust cycle of volatile markets and risky Wall Street financial products like derivatives, which were largely to blame for the 2008 financial crisis. When a recession does occur, private banks slow or freeze the issuing of credit, but public banks actually do the opposite. It is this ability to loan “countercyclically” that enabled North Dakota, home to the only public bank in the United States, to not only escape the Great Recession unscathed, but post record profits in 2008 (and every year since.) In short, public banks provide greater security than their private counterparts, prioritizing the well-being of citizens rather than garnering profits for a handful of ultra-wealthy shareholders.

Despite being practically non-existent in America, public banking, like socialized healthcare, has been conducted in cities and countries all over the world for hundreds of years. 40% of the world’s banking is public. Its relative absence here is, like a lack of affordable housing, a byproduct of America’s consolidation of wealth and power in the hands of a few.

There are limits to what a public bank is capable of, although restrictions may vary from state to state. The Bank of North Dakota, for instance, is prohibited from competing with commercial banks, and so while it provides a range of below-market rate financial products — student, home, and auto loans, as well as checking and savings accounts — it has only one brick-and-mortar location, does not distribute ATM cards, and relies largely on partnerships with community banks and credit unions to conduct its consumer-facing business.

Despite the limits private capital has placed on the Bank of North Dakota, there are areas in which financial prosperity and the public good align — which is partly why there have been a host of attempts to implement public banks in America at the state and city level since 2011. Many of these were facilitated by the Public Bank Institute and its founder, Ellen Brown, whose book The Public Banking Solution generated a groundswell of interest around the concept. Efforts to create public banks have been undertaken or are currently underway in New Mexico, Philadelphia, Washington, D.C., Oakland, and Los Angeles.

Public banking initiatives have primarily been the domain of armchair finance wonks and banking professionals, rather than the product of grassroots activist movements. This might explain why efforts to institute a public bank have fallen short so far. In 2014, the Seattle City Council took up the idea but was unsuccessful. Nick Licata, who sponsored the effort, surmised that they “did not have enough time to mount a major campaign to push for a municipal public bank. [It] would have taken a larger more organized community effort than what existed.”

Divesting from private banks and building a Seattle public bank appeals to technocratic, New Deal–ish nostalgia for good governance. It “just makes sense.” But that’s not enough to make it a reality. Developing and spreading a message that appeals to an urgent, well-understood human need is the key to galvanizing ordinary people around the idea of a public bank. It’s also the key to ensuring that this institution will meaningfully address our housing crisis.

In November 2017, the Seattle City Council earmarked $100,000 for a public bank feasibility study. Soon, they will begin exploring the logistical and legal implications of transferring hundreds of millions of dollars to this new institution, and the limits of its ability to conduct business. While this is no doubt a significant victory, a grassroots effort must be undertaken by Seattle’s activist left to ensure that the fruits of this study come to bear. Activists must engage the public and gather grassroots support for a public bank, and affordable housing is a key component of that message. Here’s what they can do.

Make Affordable Housing Synonymous with Public Banking: Taxes and subsidies can help raise money for affordable housing, but they do nothing to address the cost. One of the largest expenses associated with public infrastructure projects is not the construction itself, but the interest on bonds that compound over time, which can account for nearly half the eventual cost. By creating a public bank, Seattle can directly loan money for housing projects at well below market interest rates; unlike private banks, they won’t be bound by a need to maximize profit margins. Seattle’s activist left must effectively communicate to local lawmakers and the public that no single funding source is capable of making as transformative an impact as a public bank.

Appeal to the Bank’s Mission: A public bank is chartered to serve in the public interest. Of course, not everyone agrees on the definition of “public interest.” Proponents of public banking, often eager to sell the idea to skeptical lawmakers, stress the importance of keeping politics out of the business of running a public bank. This is a bit of kayfabe, belying the fact that a) forming a public bank is a political decision in and of itself; and b) the definition of “public interest” is inherently political. In North Dakota, for instance, environmental activists were critical of BND’s financing of the militarized police presence at Standing Rock — and rightly so.

Regardless of one’s political persuasion, most can agree: it is not in the public’s interest to have so many Seattle residents sleeping in tents or on streets. Nor is the public good served by having so many residents squeezed out of their homes because they’re unable to afford skyrocketing rents. It’s both wasteful and morally repugnant. That’s precisely why Seattle activists should lean into the fight for an equitable charter by demanding rigorous and binding community oversight of a Seattle public bank’s investment decisions, so that it does not fall prey to the same mistakes as private banks.

Issue Concrete Demands: With a public bank at the city’s disposal, there would be even fewer excuses for obstinate lawmakers to act indecisively. Seattle’s left should use this as an opportunity to reframe the conversation around affordable housing, issuing concrete demands that may otherwise be less palatable. A good start would be to insist that the number of low-barrier housing units be tied directly to the city’s official figures on unsheltered homeless people. (The figure currently stands at about 3,000.) While Seattle has made limited inroads with the same “Housing First” policy that has virtually eliminated chronic homelessness in Salt Lake City, its commitment to this solution has been halfhearted thus far.

And what of sheltered homeless, or those a single paycheck away from being on the street? The Jon Grant’s campaign’s signature plan — 25% affordable housing on all new developments — would be even easier to implement with a public bank in place to incentivize building. The Housing For All Coalition’s demand — that we quadruple HALA’s goal by creating 24,000 public or private housing units at 0–30% AMI (Area Median Income) over the next ten years — would also be eminently achievable.

Perhaps most critically, any permanent solution to Seattle’s housing must involve ending our reliance on market-based controls such as inclusionary zoning. Our city government cannot depend solely on for-profit developers when it comes to a human need as urgent as housing. The city could leverage a public bank’s power to help fund community land trusts and build public housing at dramatically lower costs. This would decrease our reliance on dwindling federal funding and ease restrictions on low-income housing requirements, expanding public housing access to more Seattleites. This is a key step if we’re to avoid exacerbating Seattle’s glaring gentrification problem while we work to resolve its affordable housing problem. The efficacy of a stronger public housing system, and a public bank’s capacity to help make it possible, should both be explored by the city’s feasibility study.

Offer a Vision Beyond Housing: Affordable housing is just one area in which the left can utilize a public bank as an instrument for reform, transforming Seattle into a city that’s capable of sustaining its growth without leaving all but the most affluent residents behind. Urgently needed infrastructure projects of all types, from renewable energy to municipal broadband, would become far less expensive and easier to green-light. Small business owners and those seeking education funding could access loans with fairer terms. Wherever possible, Seattle activists should articulate the power of a public bank to rise to unmet needs.

One example is Seattle’s exploitative payday lenders. One in four Americans are classified as unbanked or underbanked, meaning they do not have full access to the same financial products, such as checking or savings accounts, that many people take for granted. The payday loan industry thrives on this unmet need, gouging customers with interest rates that can exceed 750%. The result is that most payday loans are taken out to pay off existing payday loans.

However, the Consumer Financial Protection Bureau recently introduced regulations that would allow private banks to make small-dollar loans. In practice, private banks are loath to offer these without a sufficient profit motive, but a Seattle public bank could work with credit unions such as BECU, which maintains a presence in lower-income Seattle neighborhoods, to facilitate fairer payday loan alternatives, as well as financial rehabilitation programs for low-income individuals. (Similar products are already offered by some credit unions.) Over time, such a strategy could effectively render payday lenders in Seattle obsolete (or make it easier for the city to outlaw them entirely.)

Seattle’s political sphere has become deeply dispiriting, as was illustrated during the recent budget deliberations over a head tax to fund housing and services for the homeless. Seattle is no longer a realm of imagination or aspiration, but one of “who’s going to pay for it?” and “Everything you said, I agree with, but…no.” A Seattle public bank is not a cure-all, but once it’s at our disposal, Seattle activists can alter the inevitable. We cannot rely on benevolent CEOs to define the terms of our future — we can build that future now.